RISK FOCUS: MULTINATIONAL
Global Expansion Challenges
for controlled master
programs has never
been greater, but fewer
carriers can now
By Alex Wright
Globalization and the growth of ecommerce resulted in more U.S.- based companies expanding and doing business overseas than ever before. However, the ever-changing raft of local tax and insurance laws and regulations multinational firms have to contend with means demand for a
fully functioning controlled master program (CMP) has never been greater.
A CMP combines a global master policy, usually issued in the country where
the firm is headquartered, with local admitted policies in the various countries
where it operates to provide umbrella coverage.
“Gone, seemingly, are the days that large enterprises are confined to only
their domestic market,” said John Osterhagen, regional practice leader, Allianz
Multinational, Allianz Global Corporate & Specialty North America.
“There is also an increasing trend for smaller corporate entities needing to
have multinational program solutions as they also become more global.”
While being the lead carrier on such a program may initially seem to be
an attractive proposition to many insurers because of the premium volume
it can earn, the risks involved are extensive. Carriers therefore need to have a
sophisticated knowledge of local laws and regulations in the countries their
clients operate in as well as a granular understanding of those businesses and the
operations they’ll insure.
Experts say few carriers have the true capability to pull this off successfully and
profitably. Those who do though, can reap the rewards.
“There are fewer carriers today with the capability of pulling together a
program of this nature than there were 15 years ago,” said Nick Batten, vice
president of global services, FM Global.
“That’s why it’s more imperative than ever to choose an insurer with an
appropriate network and controls in place with consistent underwriting, form and
Increased regulatory scrutiny requiring companies to conform with local tax and
insurance laws and the threat of penalties from governments and local authorities
drove many multinationals to turn to CMPs as a solution. Added to that has been
the escalation of bilateral and multilateral agreements among regulatory bodies
with shared borders, which further tightened the net on foreign firms.
Osterhagen said the need for CMPs is also driven by demand from companies
for specialty coverage, including cyber, aviation, product recall, equipment
installation and terrorism/political risk. Additionally, there has been increased
client awareness of compliance and taxation issues, he said.
“A controlled master program is the industry standard in being able to meet
these client needs,” he said.
“It allows for both uniform cover and central control, while also providing
the flexibility in local underlying policies to respond to local rules, insurance law,
taxation, market standards and language.”
Being the lead on large corporate
lines programs enables the carrier
to better influence policy terms and
conditions as well as to expand its
risk share when opportunities present
themselves. They have a greater chance
of being profitable with a wider spread
“From a property standpoint, the
greater scale and geographic diversity
of risk, the better for the carrier,” said
• Globalization and technology are
creating more opportunities for
• Controlled master programs
should ensure compliance with
local tax and insurance law.
• Few carriers have the capability
to service these programs well.
“You need to understand your
client’s business fully, what
they are trying to achieve from
their insurance program and
how you can address those
needs in the multiple countries
they operate in.”
— Steven Haasz, global chief operating officer,
AXA Corporate Solutions Assurance
More U.S.-based companies are doing business overseas, but insuring those activities can be complicated.